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The Gift That Keeps on Giving

1. Audience Has Arrived

The most recent Webcast Metrics report marks a new milestone. For the first time since we began tracking online listenership for radio, the total audience measured has eclipsed 1.6 million Average Active Sessions (AAS) M-F 6A-8P. In fact, the number nearly bypassed the 1.6 million step all together, ending up at 1,689,462. Here’s a historical trend that displays the consistent growth of the space over the past two and a half years.

Fueled by the continued growth of pure play leaders Pandora and Slacker, as well as the aggressive maneuvers made by Clear Channel’s iHeartRadio service, the online audio space has now achieved the audience scale necessary to attract meaningful advertising dollars.

If the audience continues to expand at the current rate of around 100,000 AAS every 3 months, we will be looking at a concurrent audience north of 3 million listeners by the end of 2014. At that point the online audience will account for more than 10% of the total listening audience.

2. It’s Time for Dollars to Follow

With average CPM’s of around $6, there is somewhere between $400 and $500 million worth of annual audio advertising revenue on the table. On top of that, there are significant display advertising impressions available as well. While the CPMs are considerably lower than audio units ($1-$3), there’s significant audience engagement (10-15 interactions/hour) enabling this display inventory to create an additional $200-$300 million in revenue. That’s real scratch. Then there’s pre-roll video. Hundreds of millions of session-starts a day create another revenue stream which can be sold at steep CPMs ($10+). That’s an additional $50-$100 million in revenue. Add it all together and the existing advertising impression pool is somewhere around $650-$900 million. Happy Holidays.

3. No Re-Gifting This Holiday

As the space continues its expansion and creates new advertising opportunities, it becomes increasingly important for publishers to create a new channel of revenue, not the same audience in a different box. Giving the digital away as a package set with the terrestrial makes zero sense. Generous? Yes. Smart? No. The dimensions of online audio expand the offering way beyond sound to include the interactive, targeting and visual benefits of online ads. Digital, mobile and social budgets are prime targets for this base of impressions. Winning this business is truly the gift that keeps on giving. Putting online and offline together is last year’s Fruit Cake in a different box. Let’s do the math. The top 1,000 radio station streams generate an average of 400 online listeners. Using the same $6 CPM as above, this additional audience would generate an extra $2.40 a spot. On average, the top 3,000 stations would generate less than $1.00 a spot. Selling the online audience with the on-air audience relegates publishers to fishing in the same revenue streams as they have always fished. These are not the budgets that are growing, but rather the ones that are shrinking. If publishers do nothing but trade traditional dollars for digital ones, they’re merely working off Thanksgiving dinner on the treadmill. Whatever small incremental increase is generated on a per spot basis, it is not likely to be accretive for the station but rather dilutive to on-air revenue.